Here's what you need to know about the process and benefits of benchmarking in your business operations. Benchmarking in business means measuring your company's quality, performance and growth by analyzing the processes and procedures of others.
If you believe there's something that can be improved within your organization, you can see how your business stacks up against the "standard" and plan out a path for betterment, whether that means cutting costs, boosting efficiency and productivity, or growing revenue. The ultimate goal of benchmarking is continuous improvement, something all businesses should aim for.
Comparing your business to others can help you generate ideas that you can adopt to get ahead. Key takeaway: Benchmarking helps your business establish an internal or external standard to measure itself against for the purposes of continual improvement.
A business can use benchmarking to measure numerous areas of their operations against internal and external standards. There are three primary types of benchmarking:. Internal benchmarking is all about improving your business by comparing it to historical data.
Whether you're comparing organizational departments or different branch locations, you can use internal benchmarking to uncover the best, most efficient practices and share them across the company.
According to Boydas, internal benchmarking can help eliminate waste of both time and money in a business. Internal benchmarks that businesses should focus on may include things like employee performance and effectiveness, as well as how employees make use of the tools provided by the business.
As the name suggests, competitive benchmarking is about setting certain goals based on what your competitors are doing. By studying the practices and standards of similar businesses to match or, ideally, exceed the industry status quo, your business can gain a competitive edge.
Competitor benchmarks can impact everything from employee salaries, services provided to customers and even employee morale, said Maida Zheng, senior advisor at The Logos Consulting Group. One step beyond competitive benchmarking is strategic benchmarking, in which a business seeks to emulate specific performance standards of world-class organizations. This may involve cross-industry inspiration, like when Southwest Airlines modeled its maintenance, cleaning and boarding processes after the time-bound, defined tasks of a well-oiled NASCAR pit crew.
Key takeaway: Business benchmarking can be used to measure progress and growth in many key operational areas.
The most common types are internal, competitive and strategic benchmarking. Benchmarking is not a one-and-done exercise; to truly benefit from this practice, a company must engage in consistent, ongoing measurement of their key activities to ensure they're moving toward their goals.
Key takeaway: Benchmarking can help you improve multiple areas of your business operations, simply by measuring progress and giving you a clear goal to strive for. In its simplest form, benchmarking involves determining where you are, where you want to be and how you plan to get there. Here is a brief overview of the stages of the benchmarking process most businesses follow:. Benchmarking begins with identifying what you want to measure. Whether it's salary, sales, team development or another area of growth, you'll want to define the activities you're benchmarking and the key metrics you'll use to track progress.
Once you know what you want to measure, you can begin speaking with employees, competitors, customers and other business stakeholders who may be involved or impacted. Initiating one-on-one or group conversations or collecting survey responses from these parties can provide valuable feedback to inform your benchmarking process. You should also conduct research on where other companies or departments currently stand.
For instance, if you're benchmarking salaries, you'll want to look at sites like Glassdoor and Payscale to see what other companies pay for the same roles and titles in your organization. Understanding the industry or departmental average can help you better set your own benchmark for measuring your company's performance.
Using your research and gathered data, you can figure out where your current performance sits compared to other companies or departments and determine an appropriate and realistic goal for improvement.
Laying out your data in an easy-to-digest format e. This is the implementation phase of the benchmarking process in which you'll develop actionable steps you and your stakeholders can take to reach your goals. Defining success and an action plan upfront gives you a clear path to hitting your benchmarks. By using either of these approaches, you can break down your big-picture benchmarking goals "increase sales" into smaller steps with concrete deadlines "reach out to five new prospects per week over the next quarter".
At regular intervals, check the progress your team is making against the defined goals in your action plan. Here are a few additional ways benchmarking can prove beneficial to your business:. Step 2: Based on your initial deep dive, establish your long-term goal s. For SEO, you might look at organic traffic, organic revenue, traffic to specific pages, specific keyword performance, or overall brand visibility. Step 4: Decide which actions will impact your KPIs the most, and create specific goals connected to the actions themselves: optimize X pages, produce Y content, secure Z high-quality backlinks, etc.
Step 5: Set your benchmarking schedule. Step 6: Work, measure, adjust, and repeat. Think of it as a road trip. Use what works for you—but generally speaking, err on the side of more frequent benchmarking, not less. But benchmarking against best practices occurs for good reason. Over time, best practices emerge based on the experience of what actions led to successful outcomes. This is especially important in a field where there is little to no formal education, no certifications, and relatively distant regulatory agencies.
In real estate, law, or medicine, for example, there are licensing processes with required coursework, independently administered written examinations, continuing education and active oversight.
There is no such procedure to train professionals who work in corporate development or innovation. The collective wisdom of what worked previously is the best our industry currently offers. For innovation professionals who do want to take action, benchmarking best practices can provide ammunition to break internal log jams and convince the c-suite that risk can potentially be mitigated when undertaking new initiatives.
For those with existing programs who are struggling to communicate value, benchmarking is an opportunity to articulate strengths and address areas for improvement. No one likes to be audited or visit the doctor for an annual physical, but those practices exist for a reason, too. Innovation programs aligning with industry standards may be more likely to build a positive reputation in the ecosystem, provide ongoing value to parent corporations and avoid shut down.
A good benchmarking process begins with data collection to provide a comprehensive picture of your program. A good benchmarking process can help your team keep the innovation program on track with specific recommendations for continuous improvement. Here are five areas to consider when preparing to benchmark your corporate innovation program against best practices:.
Articulating measurable goals and objectives for your innovation effort may be key to sustaining the program over the long term. Approved strategies can also act as metaphorical guard rails, streamlining internal decision-making processes.
Strategies should outline the general criteria for transactions without specifying individual products, partnership opportunities, investments or target acquisitions. Reviewing the strategy annually against goals helps the innovation team make adjustments to maintain alignment with the needs of senior executives and shareholders. An articulated strategy also makes it easier for the innovation team to communicate accurately with external stakeholders, generating targeted deal flow.
Infrastructure can include tracking databases, reporting standards, accounting tools and methodologies, standard term sheets and valuation approaches. Without this groundwork in place, chaos can overtake otherwise orderly business.
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